The start of a banner year for gold has left some Wall Street strategists shunning the market, at least in the short term.
Gold futures closed at $2,684.7 per ounce on Wednesday, another record high. This is the sixth consecutive trading day of gains. Spot gold is also at a record high, up about 29% so far this year.
This round of gold's rebound seems to be the combined effect of global central bank buying and the Federal Reserve's interest rate cut, and has been recognized by more and more funds.
"Gold prices are being driven by themselves. That is, despite the rise in the dollar and U.S. Treasury yields, its positive momentum is driving speculative inflows," said independent analyst Ross Norman.
These factors could drive gold's continued gains into 2025 and beyond, but this year's huge gains are beginning to worry even some bullish firms.
For example, a report from Bank of America on Wednesday said gold prices could rise to $3,000 an ounce over the next 12 to 18 months. However, Jared Woodard, an ETF strategist at Bank of America, warned in the same report that gold could be "tactically overbought."
“While the long-term outlook is positive, we are highlighting some risks today,” Woodard wrote. “Gold is 200% above its 15-day moving average. Historically, returns have been flat 1-6 months after such extreme trades.”
Similarly, UBS strategist Wayne Gordon raised his price target on gold but warned that a short-term pullback could be in the cards.
“While some near-term price consolidation appears likely given the speed and magnitude of the rally, this year’s pullbacks have been shallow and brief in nature,” he said in a note to clients Thursday. “Investors have really had to chase higher this year. Pullbacks could be when tactical traders start to enter the market, especially if the longer-term trend remains intact.”
UBS now expects gold prices to reach $2,750 an ounce by the end of 2024, up from its previous forecast of $2,600; by mid-2025, gold prices will rise further to $2,850 an ounce and to $2,900 an ounce by the third quarter of 2025.
As the US election approaches, UBS believes that uncertainty is increasing, which may further boost demand for gold as a safe-haven asset. In addition, the bank observed that while Swiss gold export data pointed to a slowdown in Chinese demand, this may be due to quota restrictions rather than a decline in potential demand.
UBS continues to recommend a 5% allocation to gold in a balanced U.S. dollar portfolio, citing its hedging properties. The firm also expressed a positive view on buying some gold mining companies as a tactical investment opportunity.
Investors may want to consider taking profits at current levels and then buying on dips, BTIG strategist Jonathan Krinsky said in a note to clients on Wednesday.
Krinsky said, "In terms of levels, we think a pullback to the 225-234 range for the world's largest gold ETF, SPDR Gold Trust (GLD), would be a timely point for investors to buy back in. This would represent a correction of about 5-8%."
The article is forwarded from: Jinshi Data
